Netflix could face similar fate as BLOCKBUSTER it flounders beside fierce new rivals

From its humble beginnings of sending DVDs to customers in the post, Netflix has gone on to become the world’s largest streaming platform. 

It was a success in part because of its then much larger rival Blockbuster’s failure to adapt to the streaming revolution. 

Its popularity surged during the height of the coronavirus pandemic in 2020, with the firm adding 36million subscribers – bringing its total to a peak of more than 220million users.

By contrast, Blockbuster’s decline was swift, with its last company-owned stores closing in November 2013. Now only one, in Bend, Oregon, remains.  

However, as the restrictions and lifestyle changes imposed as a result of coronavirus have subsided, so have Netflix’s fortunes.   

The firm announced today that its customer base fell by 200,000 between January and March this year and it could fall by a further 2million between this month and June. 

Netflix said the Covid boom had ‘created a lot of noise’ as it blamed its slowdown on the post-lockdown return to normality. 

But the firm also blamed stiff competition from rival streaming firms including Disney+, Apple TV and Now TV, as well as the cost of living crisis gripping the West, and its decision to ‘quit’ Russia after Vladimir Putin’s invasion of Ukraine. 

Netflix has also struggled to fend off the rise of Amazon’s streaming service Prime Video, which has rocketed in popularity and currently has around 200million subscribers signed up.

Netflix was founded in the U.S. in 1997 by Reed Hastings and Marc Randolph and began as a DVD-by-mail service. 

Its website – the first ever DVD rental and sales site – was launched the following year, with a subscription service quickly following. 

The firm became a publicly listed company in 2002 and had an initial market capitalisation of $6.5billion. By 2006, the firm had five million users. 

In 2000, Mr Randolph had offered to sell his firm to established rival Blockbuster but the offer was rejected. 

The Netflix founder revealed in his 2019 book that Blockbuster’s CEO at the time of the sale offer, John Antioco, had almost laughed when a $50million price tag was mentioned. 

At the time, Blockbuster was the dominant player in the DVD and video rental market. The firm reached its peak in November 2004, with 84,300 employees and 9,094 stores worldwide.

However, whilst Netflix introduced its streaming service in 2007, Blockbuster failed to adapt and its decline was swift. The firm filed for bankruptcy protection in 2010.   

The following year, Dish Network bought Blockbuster’s 1,700 remaining stores before the last company-owned stores closed in 2013. Blockbuster’s 528 stores in Britain were among those that had to close. 

From 2007 onwards, Netflix’s popularity ballooned, with the firm widening its usability to the Xbox360, Blu-ray players and TV set-top boxes in 2008.

Netflix was founded in the U.S. in 1997 by Reed Hastings (pictured) and Marc Randolph and began as a DVD-by-mail service 

Netflix was founded in the U.S. in 1997 by Reed Hastings and Marc Randolph and began as a DVD-by-mail service. Its website – the first ever DVD rental and sales site – was launched the following year

Netflix’s current loss of subscribers is the first time in a decade that it has declined in popularity. Above: The firm’s membership growth in 2021, compared to the current and estimated falls for 2022

This graphic shows how Netflix benefitted from the Covid boom. Between January and March 2020, business continued as it had done in 2019 and 2018, before the number of new accounts rocketed from mid-March through to May as much of the world went into lockdown. It continued expanding through 2020, but then declined in 2021

Upon news that it had shed 200,000 subscribers, Netflix’s shares plunged by 25 per cent. So far this year, its shares are down about 40 per cent

In 2012, Netflix expanded into the UK, Ireland and the Nordic countries and its membership hit 25million. 

Netflix CEO Reed Hastings: Boston-born founder with Santa Cruz mansion, ‘Olympic-sized’ swimming pool and two private jets

Netflix CEO Reed Hastings in the Milken Institute Global Conference in Beverly Hills on October 18, 2021

Hastings was born in Boston, Massachusetts, attended Bowdoin College, and after considering serving in the armed forces as a Marine, joined the Peace Corps instead. He then got a masters in computer science from Stanford University in 1988.

Before Netflix, he founded Pure Software, a software troubleshooting company in 1991. He later left the company after an acquisition to start Netflix in 1997 with colleague Marc Randolph.

Netflix, which initially offered DVD rentals by mail, grew rapidly as the internet expanded and Hastings became the unchallenged boss when Randolph left in 1999. But it was when Netflix began producing its own content that the California-based company truly became a force to be reckoned with.

Hastings certainly enjoys the fruits of his labour, sharing his vast home with his wife of more than 30 years, Patty Ann Quillin, and their two adult children, musician Molly and Sean. Together, they lead a lifestyle that seems an unusual blend of high-tech luxury and pastoral charm.

It was previously reported that they own two private jets. The Santa Cruz mansion boasts an Olympic-sized swimming pool and a 12-person Jacuzzi. A home theatre – for Netflix binges, no doubt – has cutting edge Dolby Atmos surround sound, a system more advanced than most US cinemas.

And their vast garage can house 12 cars, while the driveway has space for a further 15. 

By the end of 2013, the number of paid subscribers had hit 41.3million and by the final quarter of 2021 – the last period of consecutive membership growth before the recent slump – this figure had hit just under 222million. 

In a sign of the positive impact that the coronavirus pandemic had on the firm’s popularity, the number of subscribers rose from by nearly 40million between the final quarter of 2019 and the end of 2020.

The firm’s in-house programming began in 2013, with shows such ass House of Cards and Orange is the New Black.

Further hits including The Crown and, more recently, Bridgerton, were to follow.  

However, in recent years the firm has had to contend with rising competition, with Amazon’s streaming service – its most popular rival – launching in 2011. Prime Video’s membership is now just 20million below that of Netflix. 

Amazon also acquired James Bond studio MGM last month in an 8.5 billion dollar (£6.5 billion) deal to build a library of content for subscribers.  

Disney’s streaming service – Disney Plus – was launched in 2019 and already has nearly 130 million members.

Apple’s platform – Apple TV+ – which was also launched in 2019, currently has only 25million members but popular choices such as The Morning Show, Ted Lasso and Slow Horses are likely to boost its popularity in the coming months.

Netflix’s current loss of subscribers is the first time in a decade that it has declined in popularity. Its loss of 200,000 users fell well short of predictions that it would add 2.5million subscribers. 

The US firm has seen its shares cut in half over the past six months as investors have grown increasingly concerned by the company’s change in fortunes.

In the UK, the pressure on streaming firms has become apparent as customers look to reduce their number of subscriptions as they witness soaring energy and goods bills during the cost-of-living crisis.

Experts at Kantar said earlier this week that around 1.5 million subscriptions have been axed in the UK since the start of 2022.

Netflix said the challenging economic backdrop, war in Ukraine, slowing rollout of broadband in some countries and the large number of subscribers sharing their account details with non-paying households have all contributed to the decline.

The company’s withdrawal from Russia following the invasion of Ukraine meant it immediately lost its 700,000 customers in the region, but the firm would have still seen figures significantly below expectations without the intervention.

As customer spending comes under pressure, the group faces increased demand for high quality content in order to justify people’s subscription fees.

The firm’s key challenge in recent years has been to ensure a strong roster of original series and films as many previous partners, such as Disney, withdrew their content to start up their own platforms.

The key reason shares dropped so sharply on Tuesday was because bosses warned shareholders that the situation was going to get worse before it got any better.

Blockbuster was once the dominant player in the DVD and video rental market. The firm reached its peak in November 2004, with 84,300 employees and 9,094 stores worldwide. Now, there is only one remaining Blockbuster outlet (pictured), in Bend, Oregon

Blockbuster filed for bankruptcy protection in 2010. The following year, Dish Network bought Blockbuster’s 1,700 remaining stores before the last company-owned stores closed in 2013. Blockbuster’s 528 stores in Britain were among those that had to close

Netflix’s stable of original content includes racy period drama Bridgerton, which stars Phoebe Dynevor (centre) and Luke Newton (left), among others

This image released by Netflix shows Lee Jung-jae, center, Park Hae-soo, right, and Oh Young-soo in a scene from the Korean series ‘Squid Game’

Amazon’s original content includes The Man in the High Castle, which boasts stars including Rufus Sewell (pictured above in character as John Smith

Another popular Amazon Prime show is the Alex Rider series, which is based on the children’s novels by Anthony Horowitz and stars Vicky McClure (pictured)

Netflix predicted that another two million users will leave in the three months to July.

The company said its profits dropped 6 per cent over the latest quarter and the downbeat outlook could suggest an even sharper profit decline could be on the cards.

Freetrade’s Paul Allison said the predicted drop in users is ‘a worrying sign… at a time when the firm is raising prices across the board to generate enough cash flow (which is currently negative) to maintain an entertaining line-up of shows’.

The streaming firm will hope that its recent heavy investment in fresh content and franchises will quickly bring rewards.

Last year, the company announced multimillion-pound deals to buy the works of Roald Dahl and the rights to the upcoming Knives Out sequels.

It will also hope that the return of top performing series – such as Stranger Things next month – will halt customers thinking about axing their subscriptions.

Bosses at the company said on Tuesday that they are considering a number of significant changes which could improve customer numbers and profitability.

The character popularly known as Baby Yoda in a scene from Disney Plus show The Mandalorian, a Star Wars spin-off series

Another Disney Plus offering is Loki, which focuses on the Marvel character of the same name. British star Tom Hiddleston stars in the lead role

This image released by Apple TV+ shows Jennifer Aniston in a scene from ‘The Morning Show’. The series focuses on the competitive world of morning television in the United States

Apple TV+ also offers the new show Slow Horses, which debuted this month. It stars Gary Oldman and Kristin Scott Thomas (pictured right)

They said they are now open to adding advertising to the service, in return for a cheaper subscription.

Reed Hastings, co-founder and chairman of Netflix, has long been opposed to introducing commercials to the service but could make the move to add another revenue stream.

The company could also clamp down on customers sharing their accounts with other households.

Netflix started a crackdown in Chile, Costa Rica and Peru on people sharing passwords and is considering expanding the scheme.

The company said in its latest financial report that it believes it is being shared with 100 million extra households alongside the 222 million paying for the service.

Netflix is also grappling with increasing desires among customers to spend more time away from screens. 

Reed Hastings infamously said that Netflix saw the human need to sleep as a bigger competitor than Amazon and HBO as it takes up a ‘very large pool of time’, saying it benefits from viewers staying up late because they get addicted to a series.